Is

the

International

Business Out

Research

Agenda

Running

of

Steam?
PeterJ. Buckley

CENTRE FOR INTERNATIONAL BUSINESS, UNIVERSITY OF LEEDS, UK

This research note challenges international business researchers to think of their future work in terms of the past achievements of their discipline. It identifies three key research areas corresponding to atINTRODUCTION
This research note suggests that the international business research agenda is running out of steam after a period of vibrancy. It suggests that 'the big research question' with which international business researchers are engaged is no longer clear cut and that, after three distinct periods where a definite research agenda was pursued, no distinctive topic has emerged to take the place of the issues previously, and largely successfully, tackled.
PREVIOUS RESEARCH AGENDA

tempts to tackle crucial empirical questions: the explanation of foreign direct investment, the multinational firm and the globalization of business. It ends by considering the future research agenda.
3. understanding and predicting the development of the internationalization of firms and the new developments of globalization. Each of these research epochs is examined below.

Explaining Flows of Foreign Direct Investment

Following World War II and the reestablishment of the international economy, the renewal and increase of international flows of direct investment were a key feature of the dynamism of Western economies. The key empirical problematic was the explanation of private flows of investment, controlled by individual corporations. Of particular importance were flows of capital from the USA to Western Europe. Traditional explanations of this surge were inadequate. International trade theory assumed immobile factors of production (labour and capital) and macro ex-

Three major topics have been successfully tackled by researchers in the international business field. These are shown in Table 1. The three key topics were: 1. explaining the flows of foreign direct investment (FDI); 2. explaining the existence, strategy and organization of multinational enterprises (MNEs);

Peter Buckley is Professorof InternationalBusiness and Directorof the Centrefor International

Business, University of Leeds (CIBUL). He is President of the Academy of International Business (2002-04) and was Vice-President 1991-92. He was elected a Fellow of AIB in 1985.
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BUSINESS RESEARCHAGENDA INTERNATIONAL

TABLE 1 BUSINESS RESEARCH PAST MAJOR TOPICS IN INTERNATIONAL Research Agenda 1. Explaining Flows of FDI Approximate Dates Topics Country Focus Eulrope [US -* Europe] Latin America Canada LDCS Japan (MNEsfrom LDCS) 4 Little Dragons

Post WWII-to 1970s US FDI in Europe ManagerialIssues of Investing Abroad Theories of MNE 2. Explanation of 1970's-1990 Existence, Strategyand Strategies of MNE MNEs of Organizationof Organization MNE Foreign Market Servicing Strategies Smaller firms in IB International Economic Integration 3. Internationalizationto Mid 1980's-2000 Joint Ventures. Alliances Globalization "New forms" of (M&A?) InternationalBusiness Competitiveness Meaning(s) of globalization 'Born globals'

EasternEurope 'Asian Crisis' China

planations of capital moving in response to differential rates of interest were not only infeasible, but failed to deal with important industrial differentials within these flows. (The steel industry remained largely national but automobile manufacturers quickly internationalised). The initial solution lay in moving the theory of FDI into the sphere of industrial economics. Although elements of this approach had been foreshadowed (Penrose, 1956; Bye, 1958)1, it was the doctoral dissertation of Stephen Hymer (1960, published 1976) which achieved the breakthrough. Hymer's central proposition was that the international firm making the entry into a foreign market must possess an internally transferable 'advantage', the control of which gives it a quasi-monopolistic opportunity to 366

local firms. Barriers to out-compete trade and barriers which prevent hostcountry firms from duplicating this advantage mean that FDI is frequently the preferred form of exploiting this advantage in foreign markets. The advantage enables the foreign entrant to overcome the innate advantage of knowledge of the local market and business conditions possessed by indigenous firms. Hymer's supervisor, Kindleberger (1969), in a popularising book, examined key areas where these internationally transferable advantages were likely to be important, thus providing a testable empirical agenda for research. Hymer was fortunate to be able to draw on John Dunning's (1958) meticulous analysis of US FDI in the UK and on Bain's (1956) analysis on barriers to entry into industries,
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PETER J. BUCKLEY

later refined by Caves (1971) in a paper which first systematised the industrial economics of foreign direct investment. The product cycle hypotheses, chiefly associated with Raymond Vernon (1966), was particularlysuccessful in explaining the dynamics of US FDI in Europe by close attention to changes in both the supply and demand sides and their complex interaction. However, it proved difficult to stretch this framework to the cases of Europeanand Japanesemultinationals, whose presence was becoming more salient (Vernon, 1974) and the framework, but not the underlying concepts, became outdated (Vernon, 1979). A second stream of research on flows of FDI concerned investment in less developed countries (Lall and Streeten, 1977). The role of the strategy of the firm at this stage took a back seat to economic determinants of FDI. However, several studies took an evolutionary, "internationalization" view of the firm. Prominent among approaches deriving from a behavioural theory of the firm was Aharoni's (1966) work on the foreign direct investment decision process. This book, with its focus on uncertainty and information, links to the work of the Uppsala school whose 'stages' model of internationalization become the foundation for the gradualist step-by-step internationalization model (Carlson, 1974, 1975; Jo-

and planning role of the firm were not central to theorizing. That was about to change.

The Multinational Enterprise

The multinational enterprise as an entity, with problems of organization and a purposive strategybecame central to the international business agenda in the 1970s. This impetus came from two directions and it is possible to argue that the two research thrusts have never been fully reconciled. The first approach followed Alfred Chandler'sreview of the changes in business organizational form through multifunction operation to divisionalization (1962) and the growth and impact of
managerial hierarchies (1977). This led

to a group of empirical studies on the organization of MNEs of different origins2, illuminated also by the painstaking historical work of Mira Wilkins
(1970, 1974). The problems of organising

hanson and Wiedersheim-Paul, 1975; Johanson and Valne, 1977). These models suggested an incremental approachto international involvement, 'deepening involvement' or 'creeping incrementalism' as the firm is pulled by market (or cost) attractionand pushed by executive interest and learning. This is in contrast to later approaches of planned globalization. FDI was seen, at this stage, as driven by external circumstance, somewhat unplanned and the coordinating
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a multinational firm were analysed in the context of the tensions in the firm and the external pressures on it. One issue is whether the firm should be divided into domestic and international divisions (in the era of globalization now a rather redundant debate) and second, the direction of managerial line responsibility-should the primary organizational principle be functional, product or geographical area? Further, there is the question of coordination with the other two variables and the issue of how this evolves over time (Stopford and Wells, 1972). The resource based theory of the firm has since had a major role in the explanation of MNEs and their strategy. The second approach derives from the ideas of Ronald Coase (1937) and together with concepts related to the transaction cost economics approach of Williamson (1975) on 'markets and hierar367

INTERNATIONAL BUSINESS RESEARCHAGENDA

chies', the internalization approach has become the dominant paradigm for the analysis of the MNE. Although preceded by McManus (1972) and closely followed by Hennart (1982) and Swedenborg (1976), the standard treatment is that of Buckley and Casson (1976). The basic approach is marginalist: by carefully specifying the transactional costs and benefits of internalizing the external markets which face particular firms in particular economic circumstances, predictions can be made between internally and externally organised markets which fix the growth of the firm. A firm will grow by internalizing imperfect external markets until it is bounded by markets in which the transactions benefits of further internalization are outweighed by the costs. The incidence of transactions costs in internal (agency costs) and external markets can thus be used to derive propositions on the speed and direction of the growth of the firm. Both locational determinants (exports versus foreign production) and ownership factors (direct investment versus licensing) specify the foreign market servicing network of the firm. John Dunning undertook a major systematizing effort in the formulation of his eclectic (theory, later) paradigm (1977, 1979, 1980, 1988). This has the unintended effect of diverting attention from answering big empirical issues into attempting to fill the boxes suggested by the theory and to widen the scope of a pre-existing explanatory framework. The relationships between the three pillars of Dunning's explanatory framework (ownership, location and internalization "advantages") led to some interesting academic exchanges and empirical developments but not to a new research agenda. 368

Internationalization to Globalization
The rise of the global economy has been an important element in the international business agenda since the 1980s. The sporadic, unplanned, externally driven approaches to international strategic planning needed to be superseded by more formal models of global strategy and the myriad ways of doing international business, particularly strategic alliances and international joint ventures, had to be captured by a holistic theoretical approach. The more overt stance of national governments towards competing in a global market led to a focus on competitiveness and the opening of new markets in the former socialist countries led to studies of the 'transition' (integration into global capitalism). The notion of competitiveness became prominent. Competitiveness often was taken to mean simply out-competing rivals in the global market. Plans to achieve this were formulated at national, industry, firm and sub-unit of the firm (Buckley et al., 1988). A national level formulation of this interpretation (how to do better than your rivals) was famously formulated by Porter (1990) and his "diamond" framework and it attracted criticism and modification from international business scholars (Dunning, 1997; Rugman, 1993). Prominent amongst new theorizing were concerns for the understanding of IJVs and alliances (Contractor and Lorange, 1988) and for studies of alliance capitalism (Dunning, 1997). There was also renewed concern in the form of organization able to cope with the new demands (Bartlett and Ghoshal, 1989). Models now had to deal with the extreme diversity and reorganization of activities and with firms which were alBUSINESS STUDIES JOURNALOF INTERNATIONAL

PETER J. BucKLEY

ready international in scope, rather than those seeking internationalization as a goal. The object of firm strategy became "flexibility", in order to adjust to increases in volatility as the sources of change and threat multiplied (Buckley and Casson, 1998). These challenges were largely met by a reconfiguration of concepts. For instance, the model of the transnational given by Bartlett and Ghoshal combines Vernon's three drivers (innovation, competing with rivals on cost and differentiation of product) but removes their temporal sequencing. Similarly, the micro analysis of IJVs covers performance and control but also relies on newer concepts such as trust to deal with issues of managing beyond the boundaries of the firm. The appearance of instant MNEs 'born globals' requires a rapid telescoping of time but still faces the firm with Aharoni/Penrose problems of knowledge assimilation and verification to combat extreme uncertainty and with the incorporation and acculturation of new executives. The new dot com companies have found this balance too challenging to cope with in the short term.

fertilising "mainstream" international business research and frequently grouped with other (more managerialist) literature as "international management" (Buckley, 1996). These issues are perhaps best understood as exemplars of a particularly fruitful methodological approach-the comparative method, rather than as answering particular issues or confronting radically separate agendas and stylized facts.

WHAT THECURRENT NOW?

RESEARCH AGENDA The above, overly brief, review shows that strength of past epochs of international business research in its close engagement with empirical reality. International business research has been successful because of its adroit choice of concepts with which to confront and explain real changes in the world economy. It is not now clear that there is a big empirical question which requires explanation (Table 2). Several potential topics may be suggested as candidates [Table 3]. They include mergers and acquisitions (M&A), knowledge management, geography and location. In addition, further explanation (or deconstruction) of the concept of globalization, with predictions for its future (further integration or fragmentation) may be suggested. New institutions in the wake of globalization, such as the increasing role of NGOs (non-governmental organizations), too, might be candidates for important research agendas. Unlike the above mixed bag, international business scholars often do have a fixed country focus. The entry of China as a major player in the global economy has given new impetus to single country studies of the market entry and development behaviour of foreign firms in China. The correspondingly disappoint369

The Role of Culture

This threefold division ignores an important element in international business theorizing and empirical studiesthe role of culture and in particular the impact of differing national cultures (Hofstede, 1983, 1991). The interplay of national cultures and organizational cultures, including the organizational culture of multinational organizations which might augment, transcend or conflict with particular national cultural traits, represents a research agenda with much life left in it. The whole question of "comparative management" has been a strand of work parallel to and cross
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TABLE 2
CURRERERESEARCH AGENDA IN INTERNATIONAL BUSINSS Research Agenda The Big Question? [LegacyIssues only?] Approximate Dates 2000 onwards. Topics M&A? Knowledge Management? Geographyand Location? Globalization? Fragmentation? New Institutions (NGOS)? Country Focus China India?

ing role of India may, eventually, give rise to a new set of such studies.

OF INTERNATIONAL THE FUTURE

BUSINESS RESEARCH The above analysis has suggested that international business research has succeeded because it has focussed on, in sequence, a number of big questions which arise from empirical developments in the world economy. The agenda is stalled because no such big question has currently been identified. This calls into question the separate existence of the subject area. It raises the old problem of the relationship between

international business and other functional areas of management and social science.3 Without a close interaction between theoretical development and empirical reality, international business could become a merely an area of application for applied concepts from other disciplines. The way forward is, paradoxically, to look back. The need is to look back to the successes of international business research. These successes were achieved by identifying the key empirical factors in the global economy which needed to be explained and then searching out a tractable means of explication within a coherent theoretical framework. The first step is to identify the most important stylized facts. In its successful era, international business researchers not only imported concepts and paradigms, they also exported them to neighbouring areas. This does not seem to be occurring at the moment. One response is to argue that international business is defined by its distinctive methods, its attention to cultural differences and the comparative method, for instance. An alternative argument might be that no big research question is needed-there are lots of issues left over from the preceding research epochs (legacy issues). These seem to be inadequate
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TABLE3
RESEARCH ISSUES FOR

2000 ONWARDS
1. Do we need a 'big question'? 2. Relationship with other functional areas-how distinctive is IB research? 3. Is the answer in methodology? (Culture,comparative studies, distinctive methods). 4. Feedback to other disciplines? (Leader or Follower?) Evidence? 5. Area of application-applied concepts from other areas? IB as empirical field-testing ground for concepts?

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PETER J. BUCKLEY responses to a keenly felt problem. Perhaps there is a need for international business researchers to discover a new 'big question". If so, this back-to-basics agenda requires the collation of new stylized facts. Among these may be the following issues: 1. Can we explain the sequence of entry of nations as major players in the world economy? (Great Britain, USA, Germany, Japan, Singapore, Korea, China). 2. Why are different forms of company organization characteristic of individual cultural backgrounds? Or is this an artifact? 3. In what empirical measures can we identify trends to (and away from) globalization? 4. Challenges to global capitalism. Bain, J. S. 1956. Barriers to New Competition. Cambridge Mass: Harvard University Press. Bartlett, Christopher A. & Sumantra Ghoshal. 1989. Management Across Borders; The Transnational Solution, Boston: Hutchinson Business Books. Buckley, Peter J. 1996. The Role of Management in International Business Theory. Management International Review, 35 (1.1 Special Issue): 7-54. &Mark Casson. 1976. The Future of the Multinational Enterprise. London: Macmillan. & . 1998. Models of the Multinational Enterprise. Journal of International Business Studies, 29(1): 21-44. , C. L. Pass & Kate Prescott. 1988. Measures of International Competitiveness: A Critical Survey. Journal of Marketing Management, 4 (2): 175:200. Bye, Maurice. 1958. Self-Financed Multiterritorial Units and their Time Horizon. International Economic Papers, No. 8, London: Macmillan. Carlson, Sune. 1974. Investment in Knowledge and the Cost of Information. Uppsala: Acta Academiae Regiae Scientiarum Upsaliensis. . 1975. How Foreign is Foreign Trade? Uppsala: University of Uppsala. Caves, Richard E. 1971. International Corporations: The Industrial Economics of Foreign Investment. Economica (New series), 38: 1-27. Chandler, Alfred D. Jr. 1962. Strategy and Structure. Cambridge, Mass: MIT Press. . 1977. The Visible Hand: The Managerial Revolution in American Business. Cambridge Mass: Belknap Press of Harvard University. Channon, Derek F. 1973. The Strategy and Structure of British Enterprise. 371

NoTEs
1. A great deal more could be said of the research which predated and foreshadowed Hymer's analysis, but that is for another paper. 2. Pavan (1972) on Italy, Rumelt (1974) on the USA, Channon (1973) on the UK, Dyas and Thanheiser (1976) on France and Germany and Wrigley (1978) on Canada. 3. Many international business scholars would suggest that the main problem is the appropriation of IB topics by scholars from other disciplines. The concern of this paper is not who does the research, but what that research should be.
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Boston Mass: Graduate School of Business Administration, Harvard University. Contractor, Farok & Peter Lorange (eds.) 1988. Cooperative Strategies in International Business. Lexington Mass: Lexington Books. Dunning, John H. 1958. American Investment in British Manufacturing Industry. London: George Allen & Unwin. 1977. Trade, Location of Economic Activity and the Multinational Enterprise: A Search for an Eclectic Approach. In B. Ohlin, P. 0. Hesselborn and P. M. Wijkman (eds) The International Allocation of Economic Activity. London: Macmillan. . 1979. Explaining Changing Patterns of International Production: In Defence of the Eclectic Theory. Oxford Bulletin of Economics and Statistics, 41: 269-96. . 1980. Toward an Eclectic Theory of International Production: Some Empirical Tests. Journal of International Business Studies, 11: 9-31. . 1988. The Eclectic Paradigm of International Production: A Restatement and Some Possible Extensions. Journal of International Business Studies, 19:1-31. . 1997. Alliance Capitalism and Global Capitalism. London: Routledge. Dyas, Gareth P. & Heinz T. Thanheiser. The 1976. European Emerging And Structure. Enterprise: Strategy London: Macmillan. Hennart, Jean-Francois. 1982. A Theory Enterprise. Ann of Multinational Arbor: University of Michigan Press. Hofstede, Geert. 1980. Culture's Consequences: International Differences in Work-Related Values. Beverly Hills: Sage Publications 372

. 1991. Cultures and Organizations. London: McGraw-Hill. Hymer, Stephen H. 1976. The International Operations of National Firms: A Study of Direct Foreign Investment. Cambridge, Mass: MIT Press (Ph.D thesis 1960). Johanson, Jan & Jan-Erik Vahlne. 1977. The Internationalization Process of the Firm -A Model of Knowledge Development and Increasing Market Commitments. Journal of International Business Studies, 8 (1): 23-32. & Finn Wiedersheim-Paul. 1975. The Internationalization Of The Firm, Four Swedish Case Studies. Journal of Management Studies, 12 (3) 305-322. Kindleberger, C.P. 1969. American Business Abroad. New Haven, Yale University Press. Lall, Sanjaya & Paul Streeten. 1977. Foreign Investment, Transnationals and Developing Countries. London: Macmillan. McManus, J. C. 1972. The Theory of the International Firm In G. Paquet (ed) The Multinational Firm and the Nation State. Toronto: Collier-Macmillan. Pavan, Robert J. 1972. The Strategy and Structure of Italian Enterprise. Unpublished DBA thesis, Graduate School of Business Administration, Harvard University. Penrose, Edith. T. 1956. Foreign Investment and the Growth of the Firm. Economic Journal, 66: 230-5. Porter, Michael E. 1990. The Competittive Advantage of Nations. New York. Free Press. Rugman, Alan M. & Joseph R. D'Cruz. 1993. The "Double Diamond" Model of International Competitiveness: The Canadian Experience Management International Review, Special Issue 2: 17-39.
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PETER J. BUCKLEY Rumelt, Richard P. 1974. Strategy, Structure And Economic Performance. Boston, Mass: Graduate School of Business Administration, Harvard University. Stopford, John M. & Louis T. Wells. 1972. Managing the Multinational Enterprise. New York: Basic Books. Swedenborg, B. 1979. The Multinational Operations of Swedish Firms: An Analysis of Determinants and Effects. Stockholm: Almqvist and Wicksell. Vernon, Raymond. 1966. International Investment and International Trade in the Product Cycle. Quarterly Journal of Economics, 80: 190-207. . 1974. The Location of Economic Activity. In John H Dunning (ed). Economic Analysis and the Multinational Enterprise. London: George Allen and Unwin. . 1979. The Product Cycle Hypothesis in a New International Environment. Oxford Bulletin of Economics and Statistics, 41: 255-67. Wilkins, Mira. 1970. The Emergence of Multinational Enterprise: American Business Abroad From The Colonial Era To 1914. Cambridge, Mass: Harvard University Press. 1974. The Maturing of Multinational Enterprise: American Business Abroad From 1914 To 1970. Cambridge, Mass: Harvard University Press. Williamson, Oliver E. 1975. Markets and Hierarchies: Analysis and Anti-Trust Implications. New York: Free Press. Wrigley, Leonard. 1978. Conglomerate Growth In Canada. Unpublished dissertation, School of Business Administration, Harvard University.

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